 Khaled Mohammed Al-Aboodi(MENAFN - Arab News) KHALED Mohammed Al-Aboodi is a development banker in a hurry. He is also part of a new generation of Islamic development bankers for whom substance perhaps takes priority over form and where performance and social and real economy impact is the yardstick.
As CEO and general manager of the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD), the private sector funding arm of the Islamic Development Bank (IDB) Group, he acknowledges that a core part of the mission of the IDB Group, and hence ICD, is to support Islamic financial institutions, especially to extend financing to small-and-medium-sized enterprises (SMEs).
ICD's support for the Islamic financial sector is assuming broader importance. "Outside the MENA region," explained Al-Aboodi in an interview, "the presence of Islamic commercial banks is very limited. You may find one Islamic bank in some of the North African countries. In sub-Saharan Africa, there were some but they were very small institutions, and largely established by the Dar Al-Mal Al-Islami (DMI) Group in Geneva. They were not doing well. This year we took over DMI's shares in these banks — Islamic Bank of Guinea, Islamic Bank of Senegal, and the Islamic Bank of Niger. The Arab Gambian Islamic Bank is not part of the DMI portfolio, and the IDB has a separate stake in this bank together with some Nigerian banks who are the largest shareholders." ICD has since then obtained a license to set up an Islamic bank in Mauritania.
To better manage these banks, ICD set up a holding company, Tamweel Africa SA, which is based in Dakar in Senegal. Tamweel Africa effectively owns the shares of the three former DMI banks plus the Islamic Bank of Mauritania. "We brought in Asya Participation Bank from Turkey, one of the largest Islamic banks there, as a joint venture partner, with ICD holding 60 percent and Asya Participation bank holding 40 percent of the equity. The capital of Tamweel Africa is evolving but we plan to have a capital of between $35 million-$50 million," confirmed Al-Aboodi.
Asya Participation Bank paid $15 million for its 40 percent stake. The reason for partnering with Asya Participation Bank, according to ICD, is because of its technical expertise. "Asya is the technical partner — they have the system, the knowledge, and they will supply the management for Tamweel Africa. We do not engage with individual banks. We engage with Tamweel Africa directly. The oversight will come from Tamweel Africa," explained Al-Aboodi.
Tamweel Africa will start operations in January 2010 and the company is in the process of appointing the senior management, including the inaugural CEO.
Markets such as Nigeria and South Africa, the two largest economies by far in Africa, will not be a focus for Tamweel Africa. Nigeria, with a Muslim population of about 75 million out of a total of 150 million, is in the process of authorizing its first Islamic bank. The country has huge potential for Islamic finance, especially in financing SMEs and development projects. However, the encouraging news is that Nigeria became member of ICD in June 2009.
Al-Aboodi stressed that Tamweel Africa will establish more banks in Africa as and when the opportunities arise. Asked whether the same model could be applied by ICD say for the CIS and Caucasus countries and in Asia, he stressed that the CIS is a different story because the involvement of CIS and appetite for Islamic finance is very small compared with Africa. At the same time, in West Africa, for instance, there is a currency union between the French speaking countries (CFA), which makes it easier to work with these countries.
"We are convinced that there is huge demand for Islamic finance in Africa. Unfortunately, these small banks were established and they did not work because they did not have the support. The Islamic Bank of Senegal, for instance, had a public shareholding of a mere 2 percent. We would like to engage more and increase public involvement with these banks to 20 percent through an IPO (initial public offering)," added Al-Aboodi.
He revealed that ICD would also be supporting Tamweel Africa through lines of financing to support its SME activities, equity injections and trade finance. The ICD was involved in a package and not just the set up and then leave the institution on its own.
ICD, together with Dubai's Noor Islamic Bank and the Maldives Ministry of Finance & Treasury, set up a joint venture Islamic bank in the Maldive Islands — the first such bank to be authorized there. The Noor Maldives Islamic Bank, which is headquartered in Male, the Maldives capital, has an authorized capital of $100 million of which $7 million is paid-up.
While Maldives Finance Minister Wasim Ibrahim has hailed the JV as a milestone for the island state, its establishment is more a demographic boost to Islamic finance than a market one. The Maldives is constrained by the size of its economy and its location. It could turn out to be an offshore hub or service largely domestic customers. While Al-Aboodi has ruled out any involvement of the Maldives Islamic Bank in tourism and resorts, he feels that there is latent potential for housing development and trade finance to serve the 300,000 or so citizens of Maldives. Above all, there is a major potential for fisheries and ICD is keen "to create a success story there."
As far as non-banking financial institutions are concerned, the ICD focus is primarily on establishing bespoke Ijara (leasing companies). The ICD has hitherto supported leasing companies with lines of financing, but it is more interested in creating the concept of the total Ijara company. SMEs, rued Al-Aboodi, are usually cut off from conventional finance, and the Ijara companies will try to redress this situation to some extent. The Ijara companies will not finance activities but buy the equipment, cars or trucks directly.
Already ICD has established a joint venture Ijara company with the Arab Investment Bank of Riyadh in Sudan called the Arab Leasing Company in Sudan.
ICD has also set up another Ijara company in Baku in Azerbaijan, which, according to Al-Aboodi, is the first such company in Central Asia. The company has a capital of $6.8 million and started operations earlier this year. This Ijara company will finance leasing facilities of up to $1 million.
ICD sees good opportunities for Islamic finance in Azerbaijan with both the government and people starting to demand such facilities and products. Recently the International Bank of Azerbaijan (IBA), the largest in the country, opened a dedicated Islamic banking window. ICD, in fact, was the first to introduce Islamic finance in Azerbaijan through lines of credit to IBA, Unibank and six other local banks.
Similarly, ICD is also in the process of setting up a wholly-owned Ijara company in Uzbekistan.
Khaled Al-Aboodi, however, agrees that the CIS countries will need a long education process about Islamic finance, but the potential is huge.
By Mushtak Parker
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